LUẬN văn THẠC sĩ (KINH tế) main challenges faced by multinational companies when planning human resources in venezuela

Main Challenges faced by Multinational companies when planning Human Resources in Venezuela Tabayre Ríos Gaudens Student Number 1712248 May 2013 Word Count: 18,431 A thesis presented

Main Challenges faced by

Multinational companies when

planning Human Resources in

Venezuela

Tabayre Ríos Gaudens Student Number 1712248

May 2013

Word Count: 18,431

A thesis presented to Dublin Business School and Liverpool John Moores' University in fulfillment of the requirements for the award degree of Masters of Business Administration in Business Management under the supervision of Mr Eddie Mcconon

May 2013

Table of Content

Abstract 4

Acknowledgment 5

Chapter 1: Introduction 6

Chapter 2: Literature Review 8

2.1The Importance of HRP as a part of the Business Strategy 8

2.2HRP Process 9

2.3HRP in MNCs 12

2.4Main Challenges faced by MNCs when planning HR in Venezuela 16

2.4.1.1: Legal restrictions 19

2.4.1.1The V e n e z u e lan O r g a nic L a bor a nd W o r k e r ‟ s L a w 19

2.4.1.21.2: Special Bar Against Dismissal 19

2.4.1.3: Exchange Control 24

2.4.2: Socio-economic factors 25

2.4.2.1.1: Influence of social factors in recruitment 25

2.4.2.2.2: Inflation 27

Chapter 3: Methodology 29

3.1 Research Question 29

3.2 Proposed Methodology 29

3.2.1: Research philosophy 30

3.2.2: Research approach 31

3.2.3: Research strategy 31

3.2.4: Research Choice 31

3.2.5: Time Horizon 32

3.2.6: Qualitative 33

3.2.7: Non-probability sample 33

3.2.8: Operationalization 34

3.3 Ethics 34

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3.4 Limitation 35

Chapter 4: Data Analysis and Findings 37

4.1 Data collection 37

4.2 Sample 37

4.3 Results from interviews 37

Chapter 5: Conclusions 48

Chapter 6: Self-reflection on own learning & peformance 50

6.1 Introduction 50

6.2 Personality and experience 50

6.3 Learning process 50

6.4 Skills identified during the learning process 52

6.5 My learning style preference 53

6.6 How can I continue to become more effective learner 53

6.7 Conclusions 54

Bibliography 55

Appendix 58

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Human Resources Planning has been in consider a key factor for the development of companies and its success is highly reflected in the markets nowadays Such planning may varies from country to country and therefore, the aim of this research paper is to explore whether Human Resources Planning can still be consider of relevance within Multinational companies in Venezuela given the main challenges faced when planning its operations in this country

The influence of external factors prevailing in Venezuela, such as legal restrictions and socio-economic problems in the Human Resources Planning has been analyzed in detail through this paper in both the academic and the field perspective As a result, this study lead us to understand that even though planning plays an important role for Multinational companies, the skill of improvising and being flexible with said planning has an important role in particular environments such as the ones currently present in Venezuela

It is shown that due to the existence of those particular challenges, global policies and practices should be adapted in order to fulfill the reality of this country In addition, it was evidenced that recruiting and retaining the right people has become a hard task in Venezuela as a consequence

of the increasing brain drain that affects the country

This research study about the main challenges faced by Multinational Companies when planning

HR in Venezuela completes my MBA in Business Management studies at Dublin Business School I would like to show my gratitude to all the interviewees who were kind enough to share their time and ideas with me during the interviews

I want to thanks my family and friends for all the support and understanding during these twelve weeks writing my dissertation

Chapter 1: Introduction

Human Resources (HR) is considered nowadays a business partner that plays an important role within the organisations Bahuguna, Kumari and Srivastava (2009, p.567) have stated that the:

“HR department now became more than a business function: it is a business partner, reaching out

to support lines of business” Thus, HR department must work in partnership with other business units to ensure the integration with other management functions

According to Anyim, Mba and Ekwoaba (2012):

"For good business performance, it is important that manpower planners become a strategic partner with the business planners For a long time, scholars in organizational development (OD) have maintained that improvement in business performance is directly tied to efficient manpower planning and closely linking the plan to strategic objectives However, what some practitioners do not realize is that the answer is not necessarily on the application of the latest management principles but rather it is on the comprehensive integration of manpower planning with business plans and strategic objectives" (Anyim, Mba and Ekwoaba, 2012, p.61)

Making the best possible use of HR have become crucial in designing the strategy of the organisation, and hence one of the most important priorities for managers In particular, HR Planning (HRP) -also known as “manpower planning”- has been understood as a vital activity since a contemporary approach suggests that the success of the organisations depends largely on its employees In this respect, Gunnigle, Heraty and Morley (2006) state:

“For example, as Snell [2005] and others have argued, in the current era of increased competition and globalization, many of the traditional sources or competitive advantage, such as barriers to entry [e.g monopolies], technology and access to capital, have become

control of the management of each company Therefore, making a good HR plan in Venezuela

implies not only analyzing the specific challenges present in this country but also how to manage and adapt the HR global policies imposed by the head office to face those challenges

In that line of thought, and bearing in mind how Multinational Companies (MNCs) operate under

different environments, Kapoor (2011, p.46) sustains that “Only the multinationals that will be willing to adapt their human resource practices to the changing global labor market conditions

less important, with the result that HR and HR processes can emerge as key sources of

competitive advantage” (Gunnigle, Heraty and Morley, 2006, p 44)

Notwithstanding the foregoing, in some jurisdictions believe that planning has become less

important due to the fact that we live in an uncertain environment However, even though

planning has become more difficult nowadays, it is still important In the particular case of

Venezuela, planning is even more challenging due to factors that are foreign and out of the

will be able to attract, develop and retain the right talent, and will likely succeed in the global

competition”

Through this paper we will illustrate the main challenges faced by MNCs in Venezuela in

conducting the planning of HR, how external factors can influence the decisions and the actions

that must be taken by these companies and how is managed this situation in connection with

other countries It is also intended to highlight the importance that HRP still represents,

especially in MNCs that operate in complex environments like Venezuela, and how it positively

influences the achievement of the organisation‟s goals, by providing a better understanding on

how said HRP helps MNCs in Venezuela to deal with mobility of employees, assigning global

tasks, managing a global workforce and adapting the strategies and plans in this special and

complex environment

In order to illustrate the relevance of this research work, it will be explained the importance of

HRP as a part of the business strategy Then, we will provide an explanation of the process that

must be considered when planning is carried out, how HRP is managed within MNCs to finally

address the main challenges faced by MNCs operating when planning HR in Venezuela We

hope this research offers an important contribution to HR students and professionals in this area from a practical point of view, in both Venezuela and other jurisdictions that might experience similar circumstances in its working environment

Chapter 2: Literature Review

2.1The importance of HRP as a part of the business strategy

A contemporary approach suggests that the success of the organisations depend largely on its employees This is supported by Anyim, Mba and Ekwoaba (2012, p.58) who have affirmed that

“Since the beginning of the 21st century, there has been increasing claims that the route to competitive advantage is achieved through people” According to this, it is possible to sustain that the better an organisation employs its human resources the better its development will be

HRP seeks to identify the needs of the organisation in terms of HR in order to create a plan that ensure that organisations count with the appropriate number and qualified personnel to meet those needs In this regard, Batholomew (2012, p.471) sustains “The essence of manpower planning is summed up in the aphorism that its aim is to have the right numbers of people of the right kinds in the right places at the right time” Thus, HRP can ensure a more accurate use of the HR, which implies more satisfied and better trained employees Also, hiring the correct people or anticipate fluctuations in hiring needs can result not only in reducing cost for organisations but also in improving their performance and reducing employee turnover This can

be done through an effective HRP designed in connection with the strategy of the organisation

Indeed, HRP must be linked with the corporate strategy in order to contribute in the achievement

of the goals set by the organisation In this regard, Reidy (2011) explains:

“Human resource planning is of major importance because the organisation needs to be prepared as far as possible for changes in its internal and external environments HR planning helps to prepare the organisation to deal with future staff and skill requirements

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so that it can be achieve its strategic objectives […] HR planning is an essential part of the overall corporate strategy […] making decisions on whether to recruit or train

employees depends on organisational plans […]” (Reidy, 2011, pp 23-24)

Based on the foregoing, linking the corporate strategy with the HRP becomes vital in order to succeed in these difficult times In this regard, Jackson and Schuler (1992, p 235) said “Because the purpose of human resource planning is to ensure that the right people are in the right place at the right time, it must be linked with the plans of the total organization”

On the other hand, HRP in MNCs will depend on how they are globally organized According to

Gunnigle et al (2007):

“Previous research on MNC subsidiaries has distinguished between those that are autonomous, those that are controlled from higher levels and those that are the source of information and resources for other sites (cf Gupta and Govindarajan, 2000) In the parallel UK study, Edwards et al., (2007: 17) posit three potential scenarios regarding the role of the HR function: An autonomous HR function […] A controlled HR function:

[…] A limited autonomy HR function” (Gunnigle et al., 2007, p 20).

However, whatever the form of organization is, HRP should be provided in connection with the business strategy In this regard, Anyim, Mba and Ekwoaba (2012, p.58) has indicated that:

“there must be congruence between business plan and manpower if the organization‟s vision, mission and objectives are to be achieved […] Integrating the manpower planning function with business plans means aligning decisions about people with decisions about business projection”

2.2HRP process

As stated previously, competitive advantage can be gain through people Thus, in order to achieve the competitive advantage, it is required to design the HRP with the business strategy

In conducting HRP, it is necessary to follow a process, which entails a set of steps that allow

organisations to determine the right number of employees with the required skills according to its goals

A traditional approach suggests that the HRP process include four stages In accordance with Gunnigle, Heraty and Morley (2006):

“The planning process […] identifies four key stages in the human resource planning process: stocktaking; forecasting; planning; and implementing […] all these stages are interlinked and thus form a cycle whereby human resource planning affects, and is affected by the range of human resource policy choices that the organisation has available

to it” (Gunnigle, Heraty and Morley, 2006, p 95)

Based on the foregoing, there are basically four HRP stages: stocktaking, forecasting, planning and implementation, which can be briefly explained as follows:

1 Stocktaking It involves analyzing the existing situation within the organisation It does

not implies only the evaluation of the needs of the organisation in terms of personnel and skills but also, but also the external factors that can affect the organisation (e.g employee mobility, economic and legal factors, among others) In this regard, Macaleer and Shannon (2003, p.16) state that organisations must “Understand the internal and external factors that may affect the achievement of the objectives that will ultimately impact the programs and services you will provide” Stocktaking is relevant because the organisation needs to know how many people need to be working and in what jobs to implement organisational strategies and attain organisational objectives;

2 Forecasting In words of Pilbeam and Corbridge (2006, p 97) forecasting “involves the

comparison between the identified supply of labour and the quantified demand for labour

in terms of the skills and competencies needed to achieve the corporate aims” Thus, the aim of forecasting is to determine the number and type of employees needed in the future

As observed, forecasting is important because without it organisations cannot asses the

disparity between supply and demand nor how effective a HRP program is in reducing said disparity ;

3 Formulation of the plan Once the organisation has identified the current resources and

the staff required, it can proceed to elaborate the plan The organisation develops action plans based on the gathered data, analysis and available alternatives It has been suggested that when creating the plan some elements should be considered In this regard, Reidy (2011, p 32) refers: “Beardwell and Claydon (2007, p.175) suggest formulating plans under the following headings: resourcing […] flexibility [ ] retention […] downsizing”

4 Implementation According to Gunnigle, Heraty and Morley (2006, p 103) “On

completion of the human resources plans, the organisation operationalizes its decision and the cycle is once again set in motion”

Also, it is important to bear in mind that HRP is an ongoing process that must be updated depending on several factors such as particular needs of the organisation, legal and economic changes, among other Reidy (2011, p.33) supports this by stating that

“organisation‟s internal and external environments need to be monitored for any signs of

change and plans need to be reviewed in light of any changes that occur in these

environments”

For some authors, the above mentioned process seems to be limited in order to fulfill staffs requirements since the HRP process should include other areas In this regard, Macaleer and Shannon (2003) state:

“The human resources planning process must consider not only specific staff needs, but also areas such as: Services to be provided in support of the specific strategic objectives and the cost and timing for these services Prioritization of the strategic objectives and identification of the specific services to support those objectives with cost/benefit analysis” (Macaleer and Shannon, 2003, p.18)